Social media companies have always struggled with monetizing the big user base that they have. Especially Twitter, the social media platform that lets users send out 140-character messages, has been operating on investment money instead of profit. At the time of their IPO, Twitter was making $500 million dollars in revenue but did not make any profit.

Although Twitter is not profitable, it still had a valuation of $24.9 billion at the time of IPO. But, if there isn’t any profit, what is that valuation based on? The answer is innovation and the prospect of monetization. Many big companies have been outcompeted by startups that applied innovative business models. For instance, Blockbuster got replaced by Netflix and Barns & Noble got replaced by Amazon.

Social media are replacing our old ways of communicating. The reach and influence of Twitter has become enormous but profits are lacking behind. Still, Twitter is valued highly because investors predict that Twitter will find a way to monetize on their influential position in the social media world.

That moment of monetization might just be upon us now. Twitter is introducing their ‘’Buy Now’’ functionality. In September 2014, Twitter started testing a way to buy products directly from their site and app. Together with payment-startup Stripe, they have developed the Buy button. This button enables retailers to turn their Twitter account into a web shop. Consumers just add their credit card details to their account and click the Buy button whenever they see a product they like on Twitter. Of course, part of this revenue will go to Twitter.

Twitter is a great example of the value of the network effect. First, they created an enormous network of people relying on Twitter to stay up-to-date. Only after the massive user base was established does Twitter introduce ways to turn that network into large revenue.

The monetization will not end with the Buy button. Recently, a MKM Partners Internet analysist stated that Twitter can reach a $100 billion valuation if they find more ways to monetize and improve user experience. That statement alone made Twitter stocks rise significantly and Twitter will work hard to reach the ‘’unicorn status’’ that is a $100 billion valuation.

Although Twitter is finally monetizing, many still call Twitter and other startups overvalued. Do you think that Twitter is overvalued or not? Share your thoughts in the comments!

It´s not the first time that the German based company Aldi is tackling an industry with a low competitive price. This time it is the fast growing music streaming industry. What sounds like a curious sideline business could be a central element for changing the brand in the next years.

Two weeks ago Aldi launched on own music streaming platform in cooperation with Napster. For only 7.99€ per month, Aldi offers more than 34 million songs and audio books. At first it seems to be nonsensical to enter a highly competitive market in which already big competitors such as Spotify, Apple Music, Deezer or Ampya exist. And even that Aldi is cooperating with Napster has only limited benefits, as this brand is only partly known by the young target group.

However, Aldi has a good timing for this launch. The pioneer Spotify has demonstrated that music streaming in a performing and lucrative market. And Apple Music and Deezer are currently highly investing in advertisement and thereby keeping this topic continuously at customer awareness. This enables an opportunity for a low-cost provider.

Aldi has already proven in the past that they provide good multimedia products. In the hardware market they have a very fruitful cooperation with Medion, and in the mobile communication market AldiTalk is very successful as well. These two examples have shown that selling products or service at a low price but with high sales number can be profitable. Additionally, Aldi can use synergies and offer bundles, as mobile services as music streaming are closely connected. For example they can exclude the data volume for Aldi Life from the monthly data volume. Furthermore, they already have an existing customer (data) base. Therefore, the success prospects for Aldi Life are high and it is very likely that this discount strategy will be successful for music streaming as well.

This new tender is strengthening the retail competence within the field of digital and virtual products, a topic that is becoming more and more important in the future. Currently price and quality are the crucial factor which grocery story the customers favor. But, especially in the e-commerce these boarders are diminishing. Amazon Fresh is a good example: It is very likely that customers that had a good (service) experience are getting to know Amazon as a retailer much better then Aldi & Co.

For traditional retail companies the only counter strategy is the development of digital products and thereby getting contact to young customers who have high potential for their core business. And nevertheless, soon or later e-commerce is becoming a non-negligible topic for every stationary distributor.

Additional note: Aldi Life is currently not available in the Netherlands, but it is very likely that is will be available here so pay attention.

Since the rise of the internet in our everyday life, a lot has changed. Firms had to revolutionise their product strategies, adapt to a whole new 4Ps conception, and serve a whole new platform of markets, namely e-markets. The trend of e-shopping was then introduced in order for firms to increase sales via the e-commerce channel. This lead to further innovations in order to contrast the vicious competitive environment of e-markets, while trying to transfer the in-store shopping experience directly online. With that being said, this article will introduce two new emerging technologies that are involved in the realistic transition between in-store and online shopping through Augmented Reality (AR).

Social Shopping

Social shopping is an e-commerce methodology bridging social media and online shopping together. Social media impacts the shopping behaviour in a way in which other people like friends, family, bloggers and celebrities recommend and suggest certain products and services to the consumers. The idea behind a social shopping website is that it provides the potential customer with blogs and virtual communities to help him in his decision in buying consumer goods and services. This is achieved by the average consumer share his shopping ideas, exchanging opinions on products, and recommending one another on what to buy and what not to buy.

A research on social shopping in 2010 found out that consumers’ trust in product recommendations had not only a direct and significant positive effect on their purchase intentions, but also a strong indirect positive effect on buying the product from that specific website where the information was originally found. The intention of a consumer to purchase a good directly from the website could in that case directly be affected by the trust in the website, thus creating an incentive to build a online shopping platform (Yu, 2010).

To better understand this, we used Shopcade as an example to analyse the technology further, and base conclusions.

Shopcade is a website and mobile app that creates a community of fashionistas and allows anyone to easily purchase the items that they see posted. The site has two main sections: the trending section and the feed section.

The trending feed is curated by the app itself. This means that it is a section with content posted only by the Shopcade team. This content comes usually in the form of blog posts regarding different fashion trends, whether it is for clothing, accessories or other items (for example, one post gave the most recent trends in duvet covers). Being a content provider as well as a service provider definitely adds value for the customers of the company. On the other hand, the feed section contains content created exclusively by bloggers and members of the community. This adds even more to the social aspect of Shopcade, giving a very Instagram-like feel to the whole social experience. This is what Shopcade does successfully. It actually created a situation where online shopping offers an experience that would be awkward to achieve in the store.

Below, the SWOT analysis of Social Shopping can be observed. It is directly applicable to the case of Shopcade.

When it comes to their revenue model, Shopcade offers nothing new. As can be expected from such a business, they make money from affiliate marketing and sales. This means that they receive commission for all the purchases made from their website. In addition, some brands want more exposure, which requires them to pay more money to Shopcade.

Virtual Fitting Room (VRF)

VRFs are the online substitution of in-store fitting rooms. It is available on PC-laptop and mobile devices. VFRs rely heavily on Augmented Reality (AR), which employs specialized software and hardware to merge the digital and the physical worlds by immersing digital information into real video to generate persuasive looking scenes in real-time. Personal measurements can be included online to allow the framework to build a 3-D avatar of the customer fitting the item. It’s built on a three-step algorithm: it builds/scan the user body through data measurements (size, width, length…), reference points (i.e face and figure) via AR, and finally, it builds the avatar incorporating the clothes on a superimposed 3D image.

Software companies such as Virtusize, Fits.me and Clothes Horse have all adapted this new technology providing it to big retail companies, attempting to tackle the fit challenge with a range of technology-based solutions, from “morphing mannequins” to size recommendation engines, all with the goal to simulate the physical fit and sizing experience (G. Randall, 2015).

Often enough shoppers complain about long waiting lines in shops and poorly set up fitting rooms. Conditions such as terrible lighting and a lack of space in the room tend to dominate the endless list of complaints. The slow but steady introduction of VFR has revolutionised the shopping industry, specifically the e-commerce aspect of it.

Using VRFs could actually increase the pleasure of shopping in many ways. Firstly, there is no hassle of having to physically put on several different clothes. The ability to take pictures whilst “trying on” these clothes means that customers can easily compare outfits. Furthermore, many side-menus can be added into the technology, this would be up to a firm to research what sort of features its customers need when trying on clothes. Some great features that many shoppers and experts posted include the ability to like and dislike garments, save pictures of outfits for later, see reviews and prices of products, as well as the ability to call in real-time service (LinkedIn, 2015).

Below, the SWOT analysis of Social Shopping can be observed, applicable to every aspect of the VRFs. As it can be observed, it is filled with opportunities leaving thoughts and space for improvement.

Future perspectives

With the VFR component only, the customers missed the social element of shopping. On the other side, the current social shopping services do not offer a developed VFR experience yet, making a visit to the store easily a necessity. We believe these technologies will merge together as the result will provide an improved customer experience. In the future those various digital resources – VFR and Social Shopping included- will be combined in an overall bigger market. Indeed, as someone will be shopping from his home -trying out clothes through the VFR system-, the person will be able to ask the opinion of a friend or a shopping assistant; involving social shopping (IBM, 2010).

The combination of those two technologies presses the question whether physical retail shops will exist in the future. It seems not to be a question of “If” but “When” physical stores will become obsolete. The reader should ask himself in how much time this change would have taken place: 5, 10, 20 years? It is difficult to say. Humans tend to think linearly, however the rate at which technology imposes itself on the world rather corresponds to an exponential curve as Ray Kurzweil and the institution of Singularity University (2012) are professing.

Facebook has been ever-growing every year, introducing always surprising news. An infinite number of retailers already have their own confirmed official Facebook page, allowing to be able to market their products, stay in touch with customers, build a Word of Mouth chain reaction and store recommendations for others to see. But what if Facebook and retail could merge together enhancing e-commerce in social media as well? If you were not up to date with Facebook’s latest move to use Shopify’s platform allowing companies and individuals to sell their products directly on Facebook. For those unfamiliar with Shopify, it’s an all-in-one platform used for e-commerce with over hundred-thousands of users already. Shopify and Facebook have been tendering, and working along-side since approximately one year. This year, they’ve announced that Facebook is currently testing the new “buy” button (F. Vendrame, 2015).

This move from Facebook to close up to the eCom world is part of its new strategy to enhance its platform to online selling. Most likely, a strategy to both attract new users as well as to attract new firms willing to sell and post their products inside to the social network. In other words, with this move Facebook is allowing for e-retailers to evolve from simply being advertising sections to incorporated eShops (F. Vendrame, 2015).

Regardless of the benefits, it’s a change that uses Shopify’s Facebook store only: it hasn’t given any benefit to brands uniquely on their personal Facebook pages. More specifically, these products are not openly seen in a major e-retailer’s official certified Facebook page, resulting in little improvement or increase in sales via social media.

Furthermore, research has shown that the average population still prefers to shop in-store rather than online. Nearly 40 percent of consumers make purchases inside a physical store at least once a week, compared to just 27 percent who do the same online, according to PwC’s annual consumer survey (C. Brooks, 2015). Usually, the main reasons why this is still the case, it’s because they want to avoid delivery costs, it’s more fun, and you get to see the item directly (C. Brooks, 2015). Another article states that: “Although e-commerce seems to get all the media attention these days, in reality, the Omnichannel Shopping Preferences study notes, 90 percent of all U.S. retail sales still happen in stores. Just 5 percent occur via online-only channels such as Amazon.com, and another 5 percent occur on the e-commerce sites of companies that also have brick-and-mortar locations”. Therefore, Facebook needs to do something more than just to amplify with Shopify if it wants to enhance the game of e-commerce in its platform. However, one solution might have found it’s light recently.

Given that on average, the 1.44 billion users spend about 20 minutes on Facebook on average, and describe Facebook as a good way to stay in touch with the world (Youtube: Facebook-Good or Bad, what’s your opinion, 2012), if both concepts of e-commerce and Facebook were to be mixed together I believe it will increase the percentage of online-shopping. In fact, Facebook has recently announced a new innovation that portrays the social network closer to e-commerce. For instance, the social network will open up two new sections: Shopping and services, which allows businesses to feature their products and services directly from their Facebook pages (Mashable, 2015). Facebook possesses over 45 million pages, and with this new features for pages, Facebook’s COO Sheryl Samberg believes that it will allow for corporations, firms, small flower shops or non-profit organisations to further house the information people are really looking for.

From a personal perspective, I am very pleased with this innovation from Facebook’s standpoint. It leads to a mixture of virtual social interaction, and getting update on friends’ life whilst “scrolling” for what product to buy on the same platform. This will save up a lot of time for consumers, as well as for e-retailers. I am personally a big user of Facebook, and I have used online company pages to be directed to their products on their website. I have worked behind online marketing via Social Media before, and I know that it’s hard to generate traffic on a major brand or retailer’s web shops from social media. Henceforth, I am excited to see where this could lead to, and whether this could be the very next step of Facebook.

‘E-commerce is dead’. Such a bold comment comes from an article that writes about one company that is re-inventing retail, and earned more cash for its eighty-thousand customers than companies such as Walmart and Zappos on 2013’s Cyber Monday [A1] (VentureBeat, 2013).

Shopify is a full-service e-commerce solution provider. The company support over 100.000 retailers, ranging from General Electric to CrossFit and Tesla Motors to GitHub. On Shopify, you can create an online store in an instant, without any developing expertise. (Wired, 2013).

Shopify receives fierce competition from all sorts of companies, ranging from point of sale companies to inventory management businesses, hot start-ups such as Square and PayPal and big names such as Magento and Google.

The underlying reason why it receives so much competition, is that the company’s vision is to have merchant’s sell anything, anywhere and anytime. So basically they compete with all sorts of e-commerce companies imaginable.

Chief Platform Harley Finkelstein explains that his software company offers the ultimate solution to retailers: a central dashboard from where you manage your online- and mobile sales, revenue streams, social commerce, inventory and financial data. No matter how you sell your stuff, or what channel you use – it all flows back to one unified online environment.

Besides this vision of integrated e-commerce software, the reason this company is becoming more and more popular is the fact they provide all advanced tools normally enhanced by large online retailers, to any retailer imaginable – a small local retailer or just you as an individual.

It will be interesting to see how Shopify develops as a high-quality, all-round service company for online stores. Does anyone of you have an online store? If so, have you considered using Shopify to run your webshop? Let us know in the comments.

Explanations

[E1] Cyber Monday is a marketing term coined by marketing agencies to stimulate online sales on the first Monday after Thanksgiving.

Alibaba, the Asian retailing giant, went public today. The company raised a staggering 21.8 billion dollars and is now worth more than Amazon. The business-to-business wholesaler from Hangzhou has grown from a modest idea from a high school teacher to one of the five largest Internet companies in the world. How did the company manage to ever grow this big?

The first strategic success factor is the fact that Alibaba, in contrast to Amazon, doesn’t own any inventory. The online marketplace takes care of the selling of items, not the products themselves. This way, the company has no inventory risk neither any investment in costly warehouses. Neither does Alibaba have its own delivery trucks; it simply controls a whole network of delivery companies. This way the company manages to stay flexible, while growing fast.

Another factor is the integration of Alibaba in all areas of e-commerce. It has become a huge network of related businesses that handle complementary products and services. The businesses’ activities in transactions, sales, delivery, cloud computing and advertising serve each other as well. But it doesn’t stop there. The company has recently developed it’s own mobile operating system, offers trade financing to vendors and rumour has it they start offering consumer loans anytime soon. Whereas most Western online retailers have a clear focus and just one or two touch points with their customers, the Asian retailer appears to mingle into the (digital) lives of its customers as much as possible.

As the company has hit the stock market just now, it will be interesting to see where this move takes the company next. It surely made the owner, Jack Ma, a whole lot wealthier. You can buy stocks for around 93 dollar. Will you join Alibaba’s adventure into the Western world? And would you consider buying from the retail giant?

This spring, I attended a workshop hosted by a very inspiring person: Jarno Vanhatapio, founder of Nelly.com, the largest online fashion retailer in the Nordics. This is his story:

Back in 2003, Jarno Vanhatapio was getting tired of his job as a construction worker in Norway. For three years, he had dreamed of putting up his own business. He had some experience as an organizer of school discos and knew basic html programming, but other than that, he had no experience of importing, e-commerce or business (and he was not that interested in fashion, either).

Jarno thought long about his options, and finally decided to start selling underwear through a web site, which he dubbed Nelly.com. The rationale was simple: a small underwear parcel would fit in the mailbox, making delivery easier. He found cheap underwear suppliers in China, and started running the business from his small studio, which was soon crammed up with cardboard boxes containing bikinis and boxers.

When Christmas was approaching, Jarno saw his sales starting to grow exponentially. After that, it never really stopped. Running the business was a constant struggle to keep up to demand, to have enough products in stock and to convince suppliers that they would eventually get paid.

After three years, the company had a turnover of around 20 million Swedish krona (approx. 2.5 million EUR) and had become the largest online underwear retailer in the Nordics. The difficulties with the supply chain were however putting a big burden on Jarno’s nerves, and when the large Swedish media group MTG made an offer to buy 90% the company, Jarno couldn’t refuse.

(Jarno to the right, probably happy because of the large amount of money he got for selling his business)

After securing the supply chain and getting new financial backing, Nelly.com could start expanding its business even more. Today, Nelly.com has 11 million monthly page views, 850 different clothes brands and a yearly turnover of 816 million SEK (approx. 100 million EUR).

The story shows how new, emerging technologies have made it possible to succeed for anyone with a fairly good idea, and more importantly, the will to implement it.

Here are some of the observations on e-commerce Jarno Vanhatapio wanted to share with his listeners:

Co-creation is great. Modern technology and social networking makes it a cheap and efficient marketing tool. For example, you can put up a design on your Facebook page, and simply ask people if it should be produced or not. It is also easy to let people submit their own designs.

The business is going to consolidate. Only a few big actors will be able to serve the variety-seeking mass markets, having both the logistical capabilities to handle high inventory turnover, and the analytical expertise to make the most out of big data.

Payment and ordering processes are getting easier. You won’t be asked to type in your credit card details over and over again. Also, companies will be able to evaluate whether you are creditworthy or not.

Classical advertising is slowly dying. As of today, 25% of Nelly’s traffic comes from fashion bloggers/affiliates. An advice he gives to fashion retailers in particular to have at least 50% of your marketing and sales department working with social media.

At ShoppingToday, an e-commerce event about the latest trends in online retail, online travel and finance, various interesting insights were given to offline and online retailers.

First, Cor Molenaar, Professor of eMarketing at Erasmus University, discussed the importance of disruption and emphasized that retailers should not fall behind on the latest trends. According to Professor Molenaar, the future of online retailing will be in mobile websites (not in apps!) and therefore all retailers should create a mobile website as soon as possible. In addition, he explained how physical shops will become important again as online retailers are now starting to work together with local shops to provide one-hour delivery (eg eBay Now). Consequently, he urged online retailers to start thinking about ways to improve their delivery times, potentially by integrating their physical stores with their websites.

Second, PriceWaterhouseCoopers discussed future trends and technologies. According to PWC, five key trends can be identified:

Big Data and Analytics: Gathering and analyzing customer data and providing the customer with interesting offers at the purchase decision

Internet of Things: Being connected 24/7 by means of a smartphone

Digital Payment: eg Google Wallet and eBay’s Paypal

Digitalization of the shopping experience: Currently we are still talking about multi-channel shopping, while retailers should offer the customer a ‘one-channel experience’, in which offline and online channels become fully integrated

Digitalization of products and services: How music, movies and books have become digitalized, many more categories will follow

Last, Edwin de Jong, 21-year old founder of Fietsuniek.nl, Omafiets.nl and Bakfietsweb.nl, elaborated on his success story. Indeed, quite remarkably, nearly three years after having founded his business, Edwin already holds over 1% of the bicycle market. His business model is focused around drop shipping. Drop shipping is a supply chain management technique in which retailers deliver goods from the manufacturer directly to the customer. Thus, the retailer does not own inventory. It took Edwin three years to successfully set up this technique.

His key insights:

Founders should not be too emotionally involved with their business. Indeed, Edwin explained that he did not have any affection for bikes nor for webshops. Yet, he saw an opportunity within the bicycle market and consequently acted upon this opportunity

It is worth investing in a domain name. Domain names can be quite expensive, but one has to make a tradeoff between paying a high cost-per-click (CPC) in Google Adwords, and investing in a domain name. (Omafiets.nl apparently cost over 50.000 euros, while the CPC for ‘fiets’ is 1 euro)

Startups should advertise effectively. For his webshops, Edwin uses affiliation, Marktplaats.nl (the Dutch eBay), Google Adwords and makes sure that potential customers can find him on Google (SEO).

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